Santos Cuts Output Guidance, Citing Challenges of Commissioning New Projects

By David Winning

SYDNEY--Santos cut a forecast for oil and natural gas output this year after encountering challenges during the final stages of commissioning and ramp up at its big new projects in Australia and Alaska.

Santos said it now expects to produce between 99 million and 105 million barrels of oil equivalent in the 12 months through December. That represents a downgrade to the company's previous forecast of 101 million-111 million barrels of oil equivalent.

Management also narrowed a target for sales volumes to 102 million-108 million barrels of oil equivalent, from prior guidance of 101 million-111 million barrels of oil equivalent.

The reduced production guidance signals that Santos hasn't fully captured the benefits of prices of crude oil rising sharply on energy supply disruptions caused by the ongoing Middle East conflict.

"The challenges encountered during commissioning activities have essentially delayed our transition to a higher production, higher cash flow generating portfolio, until the second half of the year," said Chief Executive Kevin Gallagher.

Santos expects strong production growth in the third quarter as the Barossa natural-gas project offshore Australia maintains steady state production and the Pikka Phase 1 oil project in Alaska rises to plateau output rates, he said.

Santos reported quarterly sales revenue of US$1.349 billion, up 6% on the three months through March.

Santos expects its liquefied natural gas and cash flow to rise in the third quarter as most of its LNG contracts reflect sales on a three-month pricing lag. It noted that the Japan Crude Cocktail--a reference price for energy in Asia--rose to more than $100 a barrel in the second quarter.

Gallagher also highlighted that five equity marketed cargoes were lifted before the end of the second quarter, but Santos didn't get receipts until after its fiscal second half began.

"The board will consider the timing of expected cash flow over the full year in determining the amount of the interim dividend, with first-half free cash flow impacted by a number of timing items that are not reflective of the company's underlying cash flow capacity," he said.

Write to David Winning at david.winning@wsj.com

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July 22, 2026 19:10 ET (23:10 GMT)